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Star Health & Allied Insurance Company Ltd

| Q3 & 9M FY2026 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤3rd Feb 26

Summary : Star Health delivered strong Q3 FY26 results with significant GWP and PAT growth, improved underwriting profitability, and robust digital adoption, positioning for sustained value-driven expansion.

Management Perspective positive : Management consistently highlighted strong financial performance, including significant GWP and PAT growth, improved combined and loss ratios, and successful digital initiatives. They expressed confidence in their strategic direction and market leadership, with analysts congratulating them on a 'good set of numbers'.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 GWP increased 23% YoY to Rs. 5,047 crore; 9M FY26 GWP grew 16% YoY to Rs. 13,856 crore.
  2. Q3 FY26 PAT rose significantly to Rs. 449 crore from Rs. 87 crore in Q3 FY25.
  3. Underwriting profit of Rs. 46 crore in Q3 FY26, reversing a loss of Rs. 79 crore in Q3 FY25.
  4. Combined ratio improved to 98.9% in Q3 FY26 from 102.1% in Q3 FY25, driven by lower loss and expense ratios.
  5. Retail health market share was 31.3% for 9M FY26, maintaining category leadership.

Future Growth Prospects

  1. India's health insurance market is structurally advantaged with policy tailwinds and rising consumer demand.
  2. Recent GST exemption on retail health is a significant structural catalyst for growth.
  3. Company focuses on value-driven growth, disciplined underwriting, and strong fraud analytics.
  4. Continued investment in agency and digital channels, expanding partnerships and market reach.
  5. Modernization of legacy platforms and workflow automation to enhance productivity and service outcomes.

Management Insights

  1. Company is focused on maintaining leadership in retail health and compounding a durable value-accuracy franchise.
  2. Disciplined execution and corrective actions on underwriting and claims management are positively impacting performance.
  3. Prioritizing profitable growth and sustainable ROE outcomes through careful portfolio calibration.
  4. Significant investments in technology are yielding tangible progress in productivity and service.
  5. Long-term policies are beneficial for both consumers and the company, improving capital efficiency and retention.

Signs of Skepticism

  1. Analyst questioned the sustainability of reserve release impacting the loss ratio.
  2. Analyst inquired if the GST cut significantly benefited the overall loss ratio.
  3. Management declined to provide specific three-year book loss ratio numbers offline.
  4. Analyst questioned if IFRS accounting overstates profitability of long-term policies in the first year.

Risk Factors

  1. Medical inflation in India remains elevated, expected to be 12-13% in 2026, necessitating price increases.
  2. Equity markets are volatile, which can cause P&L accounts to fluctuate under IFRS accounting.
  3. Potential regulatory changes regarding commission and expenses of management could impact operations.

Good To Know

  1. Company operates under IND AS accounting, aligned with IFRS principles.
  2. The Insurance Laws Bill 2025, 'Sabka Bima Sabki Raksha', is a significant policy milestone.
  3. Lives covered under retail health exceeded 6 crore by March 31, 2025.
  4. Investment yield was 9.6% for 9M FY26, with 18.7% of the book in high-yielding assets.
  5. Cashless claims NPS improved to 72, and overall company NPS improved to 64.

Key Drivers

  1. Strong GWP and PAT growth.
  2. Improved underwriting profitability and combined ratio.
  3. High digital adoption and tech investments.
  4. Favorable regulatory environment and policy tailwinds.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Questions on medical inflation trends and their impact on future claims ratios.
  2. Discussion on consumer preference for long-term policies and their benefits.

Financial Highlights

  1. Questions on earned premium growth trajectory and impact of past price hikes.
  2. Inquiries about commission ratios, deferred acquisition cost, and expense ratio drivers.
  3. Discussion on loss ratio improvement, particularly in the renewal book and sustainability of reserve releases.
  4. Clarification on investment income recognition and IFRS accounting for equity volatility.

Product Composition

  1. Inquiries about the proportion of long-term policies in new business and GWP.
  2. Questions on the mix and limits of high-yielding assets in the investment portfolio.

Strategic Considerations

  1. Questions on regulatory developments concerning commissions and expenses of management.
  2. Inquiries about ongoing hospital negotiations and common empanelment initiatives.
  3. Discussion on the company's target combined ratio and mid-teens ROE objective.